Q&A: Capgemini's Smith on getting back to growth

Capgemini North America CEO Chell Smith talks about the changes she's orchestrating

When companies put the brakes on IT spending in 2000, the IT services sector was one of the hardest-hit industries. Lower demand from users led to sharp decreases in revenue and mass layoffs at services firms. Some vendors are still trying to recover from the hits they took.

Chell Smith, who in April was named CEO of Capgemini's North America division in New York, is focusing on three key areas: employee retention, winning more competitive bids, and improving the unit's sales forecasting. She spoke with Computerworld about those and other issues yesterday.

What has been your charter since you became CEO of North America? When I came into this role, it was with a clear mandate to take us back to growth. The market was starting to heat up.

The first priority I have is around people, in re-engaging our people's hearts and minds in the business -- why this is a good place to be. Everyone in the tech services and consulting business is facing big attrition numbers. What's different this time is that people are not leaving us for other consulting roles, but they're going into the private sector, sometimes even into government roles.

What steps have you taken to address employee retention and morale? One of the things we're doing is holding a lot of employee surveys and focus groups, where we communicate what we're doing. Employees ask us a lot of questions, and we try to respond to the things they ask for.

We've done some basic things around expense management. For instance, we had expense limits in some cities where some people were getting dinged by accounting on 50-cent expense overruns on dinners. We've also created more opportunities for people to work from home.

Morale is definitely better than it was in April. Our turnover numbers have dropped five or six points since March. But [the current attrition rate of] 25% is still concerning to me. Fifteen or 16 is a healthier level for a project-based business. So I'm not ready to declare victory yet.

Chell Smith, CEO of Capgemini's North America division in New York
Chell Smith, CEO of Capgemini's North America division in New York
What else have you been focusing on? My second priority has been sales and driving higher win rates and more profitable growth, while qualifying the deals that we're going to bid on.

In terms of results, we're extremely pleased with the TXU win [a 10-year, $3.5 billion deal with Dallas-based TXU Corp. in May to provide business process and IT services]. In a pursuit process that took just over five weeks, we created a $3.5 billion deal in the utility sector and how business services could be delivered off a shared services platform, including complete business process services. That was a huge win and put a lot of wind in our sail.

Our deal size is edging up, our charge-out rates are edging up -- which tells me we're doing a better job of going after the deals we have.

Our third priority is around day-to-day operations in terms of forecasting and delivering our results. We have delivered our forecast two months in a row. Compared to where North America had been, that's a huge improvement.

Where are you seeing strength in the IT services market? We're seeing a rebirth in the telco sector, more in the wireless sector than wire-line. We're also seeing strength in the health care sector, and there's also growth in the government space. The retail sector has been very hot, and we're seeing a slow resurgence in [financial services].

We're sold out in PeopleSoft [deployments], and SAP has been incredibly hot for us. We can't seem to hire fast enough in our supply chain management practice. So we're hiring aggressively.

Has your group been able to raise its consulting rates yet? We've been able to raise them a little bit, but I don't know if I'd call this a trend and if we're back to the good old days.

What are the top challenges Capgemini's clients currently face with respect to managing IT? What steps has the company taken to address those? They're the same challenges they've been facing: delivering better capability at lower cost. In a lot of companies, IT is the largest capital expenditure. So that's their biggest challenge, and I would say their ability to quantify results of transformation programs.

In our business process areas like CRM and supply chain, one of the biggest problems clients have in demonstrating the value of the program is that they don't have a good baseline of metrics to know where they're starting from. One of the things we do for them is put together a balanced scorecard and metrics to help them drive transformation.

How is Capgemini's global sourcing strategy different from other services firms? Because of our strength in Europe, we've been able to offer a blend of services that speak to a number of cultures and services. So for Montreal we can offer France as a resource center. The same is true for Germanic-speaking countries and Nordic countries that are using our delivery centers in Krakow. For North America, our primary source of low-cost resources is India, but we do have options to use centers in different countries.

Is Capgemini examining any expansion into other countries as wages rise in India? People are ringing the bell too early and being Chicken Little-ish about wage pressure in India. They're graduating 100,000 [computer scientists] per year, and it's going to take China years to have the appropriate skill levels and handle the language barriers. I just don't see it changing in a five-year time frame.

Copyright © 2004 IDG Communications, Inc.

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